8 Ways to manage your additional take home pay

Last week I talked about feeling the effects of tax reform. With the newly implemented Tax Reform Law, you may be able to take home additional income after the tax deductions. Here are ways to manage your additional take home pay.

#1 Be Conscious of Lifestyle Inflation

Let me once again introduce you to the term ‘Lifestyle Inflation.’ It means your spending goes up when your income goes up. Lifestyle inflation happens when we get a raise and what causes most people to be stuck (in debt, without savings) with regards to their financial goals.

#2 Save and Invest the additional pay

You manage to survive living with your previous take home pay so why not continue to do that? The excess funds can be divided depending on your financial goals like:

* Education Fund (for yourself – post graduate studies or your children’s education fund).

* Emergency Fund – this is your chance to finally build it!

* Retirement Fund – Other than working hard, you must also let your money work hard, if not harder

* Business Capital – You can save those extra pesos for future capital for your dream business.

#3 Recalculate expenses

There will be some increases in costs due to TRAIN law’s implementation but you still have the power to control and create a budget that works for you. You can start by reducing your expenses in sodas, coffee, or vices (alcohol, cigarettes and the like). While you anticipate, also don’t forget to leave some extra for you to either enjoy or invest!

#4 Change of Habits

Recreating an adjusted budget is one thing for that is simply a basic financial plan, the next challenge now is the execution of the plan. For some of us, this will be a bit difficult so you need to create new habits as well. This is a process and the change will be gradual. Think of it as improving your lifestyle to make you one step closer to success in life.

#5 Avoid new debt

If you have current debts, then it is best to pay them off as soon as you can with your additional take home pay. Once that is done, then I implore you to not get into debt again just because you can afford more things doesn’t mean you go and spend it all.

#6 Get protected

If you are not yet insured, then now’s the time to get one. You buy life insurance not because you are going to die, but because your loved ones need to continue living. Also, I’m sure most of us wouldn’t want to be a burden when we leave this good earth, right?

#7 Enjoy

Enjoy responsibly. You can take half of your additional income as a travel fund while to other half for something you may want to save and grow for the future. Life is not all suffering but it is also full of fun and love. As they say, you have the power to create new experiences for yourself; some of it requires a lot of money while some don’t even cost a thing. Go do what makes you happy.

#8 Share it!

You could share it by treating your friends (not every month of course!) and family. Another option is to donate it to charity or buy something useful for others (for the less fortunate or perhaps victims of disasters: earthquake, flood, fire and the like)!

Remember, material things will not bring you happiness.

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The writer wears many hats: RFP®–Registered Financial Planner | Licensed Real Estate Broker | Content Creator- www.vernongo.com; Vice-Chair- www.cebucontentcreators.com